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Article
Conventional Absorption Costing Information Model and Operational Decision Making: An Empirical Critique
Canadian Open Accounting Journal (2014)
  • Chukwumah Lawyer Obara, Dr
Abstract

The need to lend a voice to the ongoing debate (which has remained inconclusive) as to the decision usefulness of the absorption costing information model in support of operational decision making informed this current study. The study obtained data from management accountants and operation managers of 82 firms listed on the floor of the Nigerian Stock Exchange (NSE) as to determine at first hand the decision usefulness of the absorption costing information model. From the review of the literature and the analysis of the field data, it was observed that the absorption costing information model has not lost its place in generating decision useful information in support of operational decision making. It was observed that operational decisions that completely ignore the absorption costing information as being too aggregated must realize that ultimately all expenses must be accounted for to determine a firm’s profit. Furthermore, the outcomes of operational decisions must ultimately navigate to the overall system’s profit which cannot be compromised pure for short term decision exigencies. Hence, capturing the complete costs of operating a system in every decision making scenario would lead to optimal decision making, as opposed to capturing only a partial costs of the system. All that is required is to glean the information to obtain that which is relevant for the specific decision making scenario.

Keywords
  • Absorption costing,
  • Product/Process costing,
  • Operational decision making,
  • Accounting information
Disciplines
Publication Date
July, 2014
Citation Information
Chukwumah Lawyer Obara. "Conventional Absorption Costing Information Model and Operational Decision Making: An Empirical Critique" Canadian Open Accounting Journal Vol. 1 Iss. 1 (2014)
Available at: http://works.bepress.com/chukwumah_obara/6/